"Confusion surrounding ESG (environmental, social, and governance) data and mislabeling of sustainable investment products complicates adoption and regulation. The sophistication of investors and regulators is necessary for the proper consumption of ESG data and development of financial products."
“As part of due diligence in assessing a strategy, investors should evaluate factors that include an investment manager’s philosophy, investment process, track record, competitive edge, and performance. Incentives are helpful in determining the alignment of interests between the investor and investment manager.”
“When considering asset managers, one should look for managers with a strong alignment of interests. This is typically exhibited through sensible fund sizes, broad sharing of incentives, appropriate or substantial GP commitments, limited partner-friendly fund terms, and tangible track records. In active management, asset owners are betting on a manager's ability to assemble a team that can execute its strategy, which includes sourcing investment opportunities, determining appropriate pricing, creating value, and successfully exiting."
“Conflating ESG with investments driven by ethical or moral inclinations unintentionally highlights the most relevant source of disarray: the failure of the sustainable capitalism field to convey its taxonomy of principles and priorities in an understandable way that sticks in the minds of market participants. Understanding the sustainable investment taxonomy is a necessary precondition to critiquing its strengths and weaknesses.”
“While there is not an inflation-proof strategy per se, a diversified investment approach is suitable for long-term investors. Avoiding decisions with a low probability of success is paramount due to the cyclical nature of markets and the impossibility of accurately and consistently predicting macro events. Moreover, reassessing value is key given that satisfactory results are probable when investments are acquired or held at a discount to their intrinsic value.”
“Some ESG factors will be material to performance and some will not. That Milton Friedman and Kofi Annan shared the same ends and philosophies highlight the inextricable link between shareholder value and ESG factors.”
